Saturday, May 10, 2008

Local Foods Retailing Memo: Tesco is Making Stronger Commitment to Local Foods Sourcing, Marketing and Merchandising in the United Kingdom

Tesco, the world's number three retailer and the number one food and grocery sales market share leader in its home country of the United Kingdom with about 32% of the nation's total retail food sales, is launching what appears to be the biggest local foods sourcing and merchandising program in the UK.
Last year, Tesco opened five new local foods' regional buying and marketing offices in the UK cities of York, Leicester, Plymouth, Peterborough and Horsham, making it the first supermarket chain in the UK to develop such an extensive regionally-based structure designed to procure and market locally-based food and grocery products.
Each of the five local offices has a buyer and marketing person who's jobs are to find and procure high-quality, locally-produced products to sell in Tesco's UK stores.
As part of its local foods procurement and marketing program, Tesco also has started holding "Meet the Farmer" local foods events in its UK supermarkets.
Since Tesco launched the program, called "Local Sourcing", last year, the retailer says it's five regional UK offices have thus far launched over 1,00 new, local food and grocery product lines in its stores, bringing the total number of locally-produced products the retailers sells currently to about 3,000. Tesco also says it's added 90 new local suppliers to its vendor list.
Tesco UK also has an executive in charge of the local sourcing program, Emily Shamma. Ms. Shamma says UK consumers want to buy quality local food and to support local producers by doing so.
Tesco customers also want to buy more local foods to cut down on food miles and the resulting carbon emissions, Shamma recently told Natural~Specialty Foods Memo.
Further, UK consumers see locally-produced foods as having overall superior quality to food products imported from elsewhere, as well as liking the idea they can know more about how the local products are produced (because the goods are local) compared to imported food and grocery products.
Tesco plans to further grow its local foods' sourcing and marketing program, according to Ms. Shamma. She says the retailer's goal is to sell more locally-produced food and grocery product lines than any other UK food retailer.
To further this aim, Tesco also has set up a fund designed to help small, local farmers expand their businesses. This is similar to what U.S.-based natural foods' retailer Whole Foods Market, Inc. is doing for small farmers in the United States as a way to promote small-scale agriculture and local food production. Tesco has put ~1 million-p ($1.95 billion U.S.) in the fund to use to help give local farmers and producers a leg up in expanding their operations.
The British retailer also has created a local technical team in each of the five regional offices. The team offers and provides free help to the local producers in the areas of manufacturing, packaging, quality assurance and marketing. part of the reason for creating these dedicated technical teams is so Tesco can make sure the local producers have the means available to meet the retailer's overall product quality control standards for the goods it sells in its UK stores.
Samma also says Tesco doesn't just want to make local foods available in its stores to wealthy consumers. Rather, the goal is to make local fresh produce for example more affordable so that it's available for UK consumers of all income levels, she says.
Tesco's current goal is to sell ~400 million-p ($780 million U.S.) worth of locally-produced food and grocery products in its stores this year, with a longer-term goal of selling ~1 billion-p ($1.95 billion U.S.) worth of the locally-produced bounty by 2011.
Tesco PLC had gross sales internationally of about $84 billion U.S. in 2007.
The locally-produced products Tesco has introduced in its stores just since last year when it opened the five new regional buying offices range from fresh produce like Yorkshire cucumbers and locally-raised fresh meat, pork and poultry products, to locally-produced ice cream and beer. The local foods initiative is across all store product categories, from fresh and frozen, to refrigerated and shelf-stable.
Tesco's main competitors in the UK--Wal-Mart-owned Asda, Sainsbury's, Morrisons, Waitrose, the Co-op and a couple others--also are to various degrees involved in local foods sourcing and marketing programs. Besides Tesco, probably Waitrose and Sainsbury's, followed by the Co-op, are the second, third and fourth most aggressive in local foods procurement and selling in their respective stores in the UK.
None of these competitors however has created as aggressive and as comprehensive local foods program as Tesco has with its five fully-staffed regional offices. And perhaps they don't need to. There are many ways to procure and sell locally-produced foods in their stores.
However, based on the fact Tesco has added 1,000 new locally-produced products in its stores, and 90 new local vendors to its roster in less than a year, it seems the regional buying office concept complete with the in-house technical teams is working well for the retailer--and for the local farmers and food producers who thus far have been able to get their goods into Tesco's UK supermarkets, which exist in nearly every city and town in the nation.
Sainsbury's and Waitrose both are increasing their local foods procurement and merchandising efforts in the UK, particularly upscale Waitrose. In per-capita size, Waitrose, which is much smaller than Tesco, is arguably the leader in local foods selling in the UK.
Wal-Mart-owned Asda recently announced it would be putting much more emphasis on local foods procuring and merchandising in its UK stores than it has up to now.
Local foods selling is becoming an international trend for Wal-Mart. The mega retailer has focused strongly since last year on procuring and selling local Canadian foods, especially fresh produce and meats and poultry in its Supercenters in that nation.
Wal-Mart also is stepping up its local foods merchandising in the U.S., the retailer's top market. It's stocking more fresh, local produce, meats and poultry, as well as more grocery products of all kinds produced locally throughout its U.S. market regions.

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